Permanent income hypothesis

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    In the early 1950s, two similar yet distinct, theories of consumption were advanced: the permanent income hypothesis and the life cycle hypothesis. Both of these theories can be viewed as a response to the Failure of the absolute income hypothesis to receive support from all forms of empirical evidence. The permanent income hypotheses (PIH) is attributable to Milton Friedman. This hypothesis evolved over a number of years. After some delay, it was published in the form of a book, entitled “A Theory of the Consumption Function (AYCF)” (Friedman, 1957).
    Original languageEnglish
    Title of host publicationAn Encyclopedia of Macroeconomics
    EditorsB. Snowdon, H. Vane
    Place of PublicationCheltenham
    PublisherEdward Elgar Publishing
    Number of pages7
    ISBN (Print)9781840643879
    Publication statusPublished - 2002


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